Corporate Insolvency Law: Complete Notes

About this subject

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Corporate Insolvency Law is studied in seven units: from what happens when a company cannot pay its debts to what happens when such a company has assets and creditors in many countries. Every bank loan to a business, every supplier selling on credit and every family booking a flat with a builder depends on this law. It matters for university examinations, judiciary examinations, UGC NET, CLAT PG and practice before the company law tribunals.

Meaning of Corporate Insolvency

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The company as a separate legal person

• A company is a separate legal person, different from its members.
• It is born by operation of law on incorporation and dies by operation of law on dissolution; in between it owns its own assets and owes its own debts.

Insolvency and its tests

Cash flow test	Balance sheet test
Can the company pay its bills as they fall due?	Are its total liabilities more than its total assets?

A company may fail either test. Corporate insolvency law decides what happens to such a company, its assets, creditors, workers and owners.

From inability to pay to default

Companies Act, 1956	Insolvency and Bankruptcy Code, 2016
Winding up when the company was unable to pay its debts	Trigger is default: failure to pay a debt that has become due, of at least the minimum amount

The Supreme Court noticed this deliberate shift in its early judgments under the Code.

Why a special law: the common pool problem

This is the common pool problem: each creditor acting alone destroys value for all. Insolvency law therefore creates a collective process that stops the race, collects the assets in one place, tries to rescue the business and, if rescue fails, distributes the value fairly in a fixed order.

Historical Development of Insolvency Law in India

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• Individuals: Presidency-towns Insolvency Act, 1909 (presidency towns) and Provincial Insolvency Act, 1920 (rest of the country), both still in force.
• Companies: mainly winding up under company law. Under the Companies Act, 1956, a creditor could petition the High Court to wind up a company unable to pay its debts. Proceedings were slow; companies stayed in winding up for decades while assets rusted under the official liquidator.

Sick Industrial Companies (Special Provisions) Act, 1985

• Passed to revive sick industrial companies, units losing money but employing thousands of workers.
• Created a quasi-judicial Board for Industrial and Financial Reconstruction (working from 1987), with an appellate authority above it.
• Reference to the Board suspended legal proceedings and recovery actions, so promoters used it as a protective wall against creditors. Cases dragged on and few companies were revived.
• Repealed with effect from 1 December 2016, when the Code took over.

Bank recovery laws and RBI schemes

• Recovery of Debts Due to Banks and Financial Institutions Act, 1993: created Debts Recovery Tribunals.
• SARFAESI Act, 2002: secured lenders may take possession of their security without going to court.
• RBI informal workouts for large borrowers: corporate debt restructuring (2001), joint lenders' forum (2014), strategic debt restructuring and sustainable structuring schemes (2015 and 2016).

Defects of the old framework

1. Too many laws and forums: High Courts (winding up), the Board (sick companies), Debts Recovery Tribunals (banks), civil courts (everyone else).
2. Laws often conflicted.
3. The debtor stayed in control, so those who caused the failure managed the assets.
4. Long delays destroyed value; the World Bank put resolution time in India at about four years.
5. Huge non-performing assets choked fresh credit.

Recommendations of the Committees

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1. Tiwari Committee (RBI, 1981)

Headed by Shri T. Tiwari; examined banks' legal difficulties in rehabilitating sick industrial units. Recommended a special law for sick units, a quasi-judicial board empowered to sanction revival schemes (from change of management to liquidation), and special tribunals for speedy recovery of bank dues. These became the Sick Industrial Companies Act with its Board, and later the Debts Recovery Tribunals.

2. Eradi Committee (1999–2000)

High Level Committee on Law relating to Insolvency and Winding up of Companies, headed by Justice V. Balakrishna Eradi (retired Supreme Court judge); set up by the Department of Company Affairs in October 1999, reported July 2000. Recommended:

• a single National Company Law Tribunal taking over the Company Law Board, the Board for Industrial and Financial Reconstruction and its appellate authority, and the High Courts' winding up jurisdiction;
• repeal of the Sick Industrial Companies Act and time limits for winding up;
• a panel of professional insolvency practitioners;
• adoption of the UNCITRAL Model Law on cross-border insolvency.

Parliament provided for the Tribunal in 2002, but legal challenges delayed it. The NCLT and NCLAT were constituted under the Companies Act, 2013 on 1 June 2016.

3. Mitra Advisory Group (RBI, 2001)

Advisory Group on Bankruptcy Laws, headed by Dr. N.L. Mitra. Recommended one comprehensive corporate bankruptcy code, repeal of the Sick Industrial Companies Act, and professional trustees in place of official liquidators.

4. Irani Committee (2005)

Expert Committee on Company Law (Ministry of Company Affairs), headed by Dr. J.J. Irani; reported 31 May 2005. It would keep insolvency within the Companies Act, but recommended:

• a definite time frame for rehabilitation and liquidation;
• a default-based test of insolvency instead of erosion of net worth;
• a short standstill period and an impartial administrator from a panel of insolvency professionals;
• a binding revival plan approved by three-fourths of secured creditors in value;
• considering the UNCITRAL Model Law.

Many of these ideas reappear in the Code.

5. Bankruptcy Law Reforms Committee (2014–2015)

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The most important committee, headed by Dr. T.K. Viswanathan and set up by the Ministry of Finance in 2014. Interim report February 2015; final report November 2015 in two volumes (rationale and design; draft Bill). It designed the Code:

• a calm period to protect the company;
• a committee of creditors deciding viability, as a business decision, not a judicial one;
• licensed insolvency professionals, information utilities as evidence of debts and defaults, and a regulator;
• strict time limits.

The Bill was introduced in the Lok Sabha in December 2015, examined by a Joint Parliamentary Committee, passed by both Houses in May 2016, and became law on 28 May 2016.

Insolvency Law Committee (2017 onwards)

• Set up in November 2017 to review the Code.
• March 2018 report: homebuyers became financial creditors; Section 12A withdrawal introduced; committee of creditors voting thresholds cut from 75% to 66% (major decisions) and 51% (others).
• October 2018 report: cross-border insolvency.
• February 2020 report: reviewed the Code once more.
• 2020 amendments: threshold for homebuyer applications; protection for the company against past offences (Section 32A); licences not cancellable merely because of insolvency if current dues are paid.
• A sub-committee of the same Committee later designed the pre-packaged process.

Constitutional Validity of the Code

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Insolvency, Bankruptcy and Corporate Rescue Compared

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Term	Meaning	Use under the Code
Insolvency	A financial state: a person or company cannot pay its debts	The condition
Bankruptcy	A legal status after a court process: the debtor is adjudged bankrupt and his estate is handed to a trustee for distribution	Used for individuals and partnership firms (Part III); for companies the Code speaks of insolvency resolution and liquidation
Corporate rescue	Saving a distressed but viable company so its business survives as a going concern	Tried first
Liquidation	One possible outcome of insolvency	Last resort, when rescue fails

In the United States "bankruptcy" covers both: a company may file for liquidation under Chapter 7 or reorganisation under Chapter 11 of its Bankruptcy Code.

Why rescue: a running business is usually worth far more than the scrap value of its parts; it keeps jobs and suppliers alive and gives creditors a better recovery.

The International Insolvency Framework

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UNCITRAL

The United Nations Commission on International Trade Law (UNCITRAL) has produced two key texts:

• Model Law on Cross-Border Insolvency (1997): helps countries cooperate when a debtor has assets or creditors in more than one country.
• Legislative Guide on Insolvency Law (2004): later parts cover enterprise groups, directors' obligations in the period approaching insolvency, and micro and small enterprises. It is not a statute but a guide to what a good insolvency law should contain, and why.

World Bank Principles

The World Bank Principles for Effective Insolvency and Creditor and Debtor Regimes (2001, revised several times) cover the legal framework for credit and its enforcement, out-of-court workouts and risk management, the formal insolvency process, and institutions such as courts and regulators. With the Legislative Guide, they form the international standard for judging a country's insolvency system.

In the World Bank's Doing Business reports, India rose sharply after the Code, reaching 52nd place in the 2020 report; the reports were discontinued in 2021.

Important International Insolvency Concepts

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The Code uses all of these:

• Collective proceeding: all creditors dealt with together instead of suing separately.
• Automatic stay (the Code's moratorium): freezes suits and recovery actions once the process begins.
• Equal treatment of creditors or pari passu ("on an equal footing"): creditors of the same class share losses in the same proportion.
• Priority rules: which classes are paid first.
• Avoidance rules: reversal of unfair transactions made just before insolvency.
• Cram down: a plan approved by the required majority binds the dissenting minority, provided the minority receives a minimum protection.

Debtor in possession	Creditor in control
Debtor stays in control during rescue	Control passes to creditors and a professional
India's pre-packaged process leans this way	India's ordinary process

The Insolvency and Bankruptcy Code, 2016: Background and Objectives

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Commencement in stages

Event	Date
Presidential assent	28 May 2016
Insolvency and Bankruptcy Board of India set up	1 October 2016
Corporate insolvency resolution process (CIRP); liquidation soon after	1 December 2016
Voluntary liquidation	1 April 2017
Personal guarantors to corporate debtors	1 December 2019
Rest of the law for individuals and partnership firms	Not yet in force

Objectives (long title)

1. Consolidate and amend the laws on reorganisation and insolvency resolution of corporate persons, partnership firms and individuals, so one Code replaces scattered laws.
2. Time-bound resolution.
3. Maximise the value of the debtor's assets.
4. Promote entrepreneurship: an honest businessman whose venture fails should exit cleanly and try again.
5. Improve availability of credit: lenders lend more freely when recovery is quick and predictable.
6. Balance all stakeholders' interests, including by changing the priority of government dues.
7. Establish the Board.

Courts repeatedly use these objectives to interpret the Code.

Structure of the Code

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Part	Contents
I – Preliminary	Section 2 (application): companies, LLPs, other notified bodies, personal guarantors to corporate debtors, partnership and proprietorship firms, individuals. Section 3: general definitions.
II	Insolvency resolution and liquidation for corporate persons
III	Individuals and partnership firms; operates today only for personal guarantors to corporate debtors
IV	Regulation: the Board, insolvency professional agencies, insolvency professionals, information utilities
V	Miscellaneous: two sections on cross-border insolvency; Section 238 (overriding effect over inconsistent laws)

Eleven of its twelve Schedules amend other laws, such as the Companies Act and the SARFAESI Act, to fit them with the Code.

Chapters of Part II

• Chapter I – preliminary and definitions; Chapter II – corporate insolvency resolution process; Chapter III – liquidation.
• Chapter III-A – pre-packaged process (added 2021).
• Chapter IV – fast track process, omitted in 2026.
• Chapter IV-A – creditor-initiated process (inserted 2026, not yet in force).
• Chapter V – voluntary liquidation; Chapter V-A – group insolvency (inserted 2026, not yet in force).
• Chapter VI – adjudicating authority and appeals; Chapter VII – offences and penalties.

Important Features of the Code

1. Time bound: the process must ordinarily finish within 180 days, extendable once by 90 days, within an outer limit of 330 days.
2. Creditors in control: directors' powers suspended; financial creditors decide through the committee of creditors.
3. Calm period: a moratorium stops suits and recovery actions, so the company is not torn apart.
4. Licensed insolvency professional runs the process.
5. Resolution first, liquidation only when it fails.
6. Information utilities supply reliable evidence.
7. Clean slate: an approved plan binds everyone and gives the buyer a clean slate.
8. Statutory waterfall in liquidation.
9. Avoidance proceedings and wrongful trading rules attack wrongdoing.
10. Single forum: the NCLT decides almost every question; Section 63 bars civil courts.

The Five Pillars of the Code

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The Board, insolvency professional agencies, insolvency professionals, information utilities and adjudicating authorities.

1. Insolvency and Bankruptcy Board of India (IBBI)

• Section 188: body corporate; head office in the National Capital Region.
• Section 189: Chairperson; three ex officio members from the Ministries of Finance, Corporate Affairs and Law; one ex officio member nominated by the RBI; five other members, at least three whole-time.
• Section 196: registers and regulates agencies, professionals and information utilities; makes regulations for every process; inspects, investigates and disciplines professionals.
• After the 2026 amendment, these regulated bodies, along with registered valuers, are called service providers.
• The Board may also lay down standards of conduct for committees of creditors, including timelines for their decisions.
• Its disciplinary orders are now passed by disciplinary committees, with an appeal to the NCLAT.

2. Insolvency Professional Agency (Sections 199–205)

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Registered with the Board; enrols professionals, lays down their code of conduct, monitors and disciplines them. A front-line regulator between Board and professional. Three are registered, linked to the institutes of chartered accountants, company secretaries and cost accountants.

3. Insolvency Professional (Sections 206–208)

Must enrol with an agency and register with the Board. Runs the process as interim resolution professional, resolution professional or liquidator (bankruptcy trustee in individual cases); must take reasonable care and diligence and follow a code of conduct.

4. Information Utility

Solves the main problem of debt cases: proving the debt exists and is unpaid. An electronic store of financial information that records, authenticates and verifies debt information and gives access to authorised persons. National e-Governance Services Limited is the registered utility. The 2026 amendment:

• a utility's record of default furnished by a financial institution with its Section 7 application is sufficient proof of default;
• an operational creditor must submit its financial information to a utility before applying under Section 9;
• a debtor who does not respond to a request to authenticate is deemed to have authenticated.

5. Adjudicating Authority (Sections 60–62)

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• Section 60: NCLT for corporate persons and their personal guarantors (bench by place of registered office); Debts Recovery Tribunal for individuals and partnership firms. NCLT and NCLAT were constituted on 1 June 2016 under the Companies Act, 2013.
• Section 60(5): NCLT can decide any claim by or against the corporate debtor and any question of priorities, law or fact arising out of the insolvency.
• Section 61: appeal to NCLAT within 30 days (+15). Since 2026, the NCLAT must dispose of the appeal within three months.
• Section 62: appeal to the Supreme Court only on a question of law, within 45 days (+15).

How the pillars work together

Key Definitions and Concepts

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Who: corporate person and corporate debtor

• Corporate person (Section 3(7)): a company, LLP or other person incorporated with limited liability, but not a financial service provider such as a bank or insurer. These hold public savings, so they are kept out; Section 227 lets the Government notify special rules for some of them.
• Corporate debtor (Section 3(8)): a corporate person who owes a debt to any person.

What: claim, debt and default

• Claim (Section 3(6)): a right to payment, whether or not decided by a court, fixed, disputed, secured or unsecured; includes a right to a remedy for breach of contract if the breach gives rise to a right to payment.
• Debt (Section 3(11)): a liability in respect of a claim which is due from any person.
• Default (Section 3(12)): non-payment of a debt when the whole or any part or instalment has become due and payable.

Minimum default (Section 4)

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Part II applies only where the default is at least ₹1 lakh, which the Government may raise up to ₹1 crore. It did so on 24 March 2020, at the start of the coronavirus pandemic. So a default below ₹1 crore cannot start the ordinary process. For the pre-packaged process the minimum is ₹10 lakh.

Financial and operational creditors (Section 5)

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A creditor is any person to whom a debt is owed; Part II divides creditors mainly into two families.

	Financial creditor – Section 5(7)	Operational creditor – Section 5(20)
Owed	A financial debt	An operational debt
Debt	Section 5(8): debt with interest disbursed against consideration for the time value of money	Section 5(21): claim for the provision of goods or services, including employment, and dues under any law to the Central or a State Government or a local authority
Example	A lending bank	Cotton supplier, employee, tax department

The simplest financial debt is money borrowed against interest. Section 5(8) also lists bonds and debentures, finance leases, receivables sold with recourse, derivatives, counter-indemnities, guarantees for any of these, and any transaction having the commercial effect of a borrowing.

Dispute, related party, resolution plan and other terms

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• Secured creditor: one in whose favour a security interest (mortgage, charge, hypothecation) is created. Since 2026, a security interest must arise from an agreement between parties, not merely by operation of law.
• Dispute (Section 5(6)): includes a suit or arbitration relating to the existence of the amount of debt, the quality of goods or services, or breach of a representation or warranty.
• Related party (Section 5(24)): persons closely connected with the company: directors and their relatives, key managerial personnel, holding, subsidiary or associate companies, and any person controlling more than 20% of voting rights.
• Corporate / personal guarantor: a corporate person / an individual standing surety for a corporate debtor.
• Resolution applicant (Section 5(25)): a person submitting a resolution plan, alone or jointly.
• Resolution plan (Section 5(26)): a plan for insolvency resolution of the corporate debtor as a going concern. Its Explanation allows restructuring by merger, amalgamation and demerger and, since 2026, by sale of one or more assets through one or more plans.
• Resolution professional (Section 5(27)): the insolvency professional conducting the process, including an interim resolution professional.
• Insolvency resolution process costs: interim finance, the resolution professional's fee and the cost of running the company as a going concern; paid first under a plan and in liquidation.

When: initiation and commencement dates

Initiation date – Section 5(11)	Insolvency commencement date – Section 5(12)
Date of filing the application	Date of admission

Since 2026, if several applications against the same company are pending on the commencement date, the initiation date is that of the first application. Look-back periods for avoidance transactions run from these dates.

Early Supreme Court Cases (2017)

All three judgments were written by Justice R.F. Nariman.

Innoventive Industries v. ICICI Bank

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Mobilox Innovations v. Kirusa Software

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Macquarie Bank v. Shilpi Cable Technologies

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Unit 3: The Corporate Insolvency Resolution Process – Meaning and Purpose

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The CIRP is a time-bound, collective process: a licensed professional takes over management, the financial creditors examine whether the business can be saved, and the market is invited to offer a resolution plan. If a good plan is approved, the company is rescued as a going concern; if not, it goes into liquidation.

The steps at a glance

1. Application to the NCLT.
2. Admission, declaration of moratorium and appointment of an interim resolution professional (IRP).
3. Creditors submit claims; a committee of creditors (CoC) is formed, which confirms or replaces the professional.
4. The resolution professional (RP) prepares an information memorandum and invites resolution plans.
5. The CoC votes; the NCLT approves the chosen plan.

Time limit – Section 12

• Completion within 180 days from admission.
• On a resolution of 66% of the voting share, one extension of up to 90 days.
• A proviso: the process shall mandatorily be completed within 330 days, including time taken in litigation (on "mandatorily", see Essar Steel below).

Persons Who May Initiate the CIRP – Sections 6, 10A and 11

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Section 6 names three persons who may start the CIRP on a default by a corporate debtor, each with its own door:

Applicant	Provision
Financial creditor	Section 7
Operational creditor	Sections 8 and 9
Corporate debtor itself	Section 10

Section 11: persons not entitled to apply

• A corporate debtor already in a CIRP or a pre-packaged process, and creditors of a company in a pre-packaged process.
• A company that completed a CIRP in the previous 12 months cannot apply against itself.
• A company or financial creditor that violated a resolution plan approved in the previous 12 months.
• A company already ordered to be liquidated.

Explanation II: such a company may still start the process against another company that owes it money.

Section 10A: the pandemic bar

Inserted during the coronavirus pandemic: no application can ever be filed for a default arising during the one-year period beginning 25 March 2020.

Group insolvency

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The Code deals with one corporate debtor at a time, though businesses often run as groups with common owners and lenders.

The 2026 amendment inserted Chapter V-A on group insolvency, enabling Government rules to coordinate group companies' processes. It is not yet in force.

CIRP by a Financial Creditor – Section 7

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• A financial creditor may apply alone or jointly on a default.
• Explanation: the default may be owed to another financial creditor; a bank whose own loan is being paid can apply if the company defaulted to another bank.
• The application must contain the record of default from an information utility or other evidence, and the name of a proposed IRP.

Admission – Section 7(5), as substituted in 2026

Within 14 days, the NCLT shall admit if (a) a default has occurred, (b) the application is complete, and (c) no disciplinary proceeding is pending against the proposed professional; otherwise it shall reject, after giving 7 days to cure defects. If it cannot decide in 14 days, it must record reasons.

• Explanation I: where these requirements are met, no other ground shall be considered to reject.
• Explanation II: an information utility record of default, filed by a financial institution with its own application, suffices to show default.

These Explanations answer the controversy below.

Vidarbha Industries Power Limited v. Axis Bank Limited (2022)

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M. Suresh Kumar Reddy v. Canara Bank (2023) and the present law

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Vidarbha caused great uncertainty, letting debtors resist admission even after a proved default.

The 2026 amendment settled the matter by statute through Explanation I.

Financial Debt and the Time Value of Money

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A financial debt is disbursed against the consideration for the time value of money (Unit 2).

Less obvious forms – Section 5(8)

• Receivables sold with recourse (the seller still bears the risk).
• Finance lease.
• Clause (f), the residuary clause: any transaction having the commercial effect of a borrowing.
• Clauses (h) and (i): counter-indemnities and guarantees for any kind of financial debt.

Maitreya Doshi v. Anand Rathi Global Finance Limited (2022)

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K. Paramasivam v. Karur Vysya Bank Limited (2022)

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CIRP by an Operational Creditor – Sections 8 and 9

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• Section 8: the creditor first delivers a demand notice or an invoice demanding payment. Within 10 days the company may point out an existing dispute, or a suit or arbitration filed before the notice, or show payment.
• Section 9: with neither payment nor notice of dispute in 10 days, the creditor may apply, attaching the demand notice, an affidavit that no notice of dispute was received, and a bank certificate and information utility record if available.
• Proposing an IRP is optional; otherwise the NCLT asks the Board to recommend one.
• Admission within 14 days if the application is complete, the debt unpaid, the notice delivered, no notice of dispute received or recorded in an information utility, and no disciplinary proceeding pending against the proposed professional; otherwise rejection.

Safeguards added in 2026

• The creditor must first submit its financial information to an information utility.
• New Section 67C: penalty of ₹1 lakh to ₹2 crore for concealing a dispute or full payment from the NCLT, replacing the old criminal offence in Section 76.

The Mobilox test applied

A real dispute raised before the demand notice means rejection (Unit 2).

Financial and Operational Creditors Compared

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Point	Financial creditor	Operational creditor
1. Nature of debt	Money for the time value of money	Goods or services supplied; or an employee or government authority
2. Trigger	Proof of default only	Demand notice, and must survive any pre-existing dispute
3. IRP	Must propose	Optional
4. Voting	Votes in the CoC	No vote; one representative may attend if their dues together are at least 10% of the debt
5. Plan minimum	Since 2026, a dissenting financial creditor gets at least the lower of the two amounts	At least the higher of: (a) liquidation entitlement; (b) the plan amount distributed in the order of the liquidation waterfall
6. Liquidation	Unsecured financial creditors rank above suppliers	Rank below unsecured financial creditors

CIRP by the Corporate Debtor – Section 10

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A corporate applicant (the company, an authorised member or partner, the person in charge of operations, or the person controlling finances) may apply on default. The application must contain information on the books of account and, since 2018, a special resolution of shareholders or approval of three-fourths of partners. A company seeks its own insolvency because the moratorium shields it from a rush of suits and the process may find a buyer to save the business.

Safeguards against misuse by promoters

A dishonest promoter may misuse this door to escape creditors on his own terms. Hence:

• Since 2026, the NCLT asks the Board to recommend the IRP instead of accepting the company's choice.
• Section 65: penalty for fraudulent or malicious initiation.
• New Section 64A: penalty of ₹1 lakh to ₹2 crore for frivolous or vexatious proceedings under Part II.

Homebuyers and Debenture Holders

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Nikhil Mehta and Sons v. AMR Infrastructure Limited (2017)

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The 2018 Explanation and class voting

• On the Insolvency Law Committee's recommendation, an Explanation to Section 5(8)(f), effective 6 June 2018, deems any amount raised from an allottee under a real estate project to have the commercial effect of a borrowing; the terms carry their meanings under the Real Estate (Regulation and Development) Act, 2016.
• Large classes are represented in the CoC by an authorised representative, who under Section 25A(3A) (2019) votes for the whole class; the class decides by more than 50% of the voting share of members who vote.

Pioneer Urban Land and Infrastructure Limited v. Union of India (2019)

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The 2020 provisos to Section 7(1)

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So that one unhappy buyer cannot drag a builder with 500 buyers into insolvency, allottees must apply jointly: at least 100 allottees of the same project or 10% of its total allottees, whichever is less. The same applies to other large classes, such as debenture holders and deposit holders represented by a trustee.

Vishal Chelani v. Debashis Nanda (2023)

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Mansi Brar Fernandes v. Shubha Sharma (2025)

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The regulations now allow a separate resolution plan to be invited for each real estate project.

Debenture holders – Section 21(6A)

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A debenture is a loan in the form of a security, so debenture holders are financial creditors under Section 5(8)(c). A debenture trustee usually represents them and, under Section 21(6A), votes for them in the CoC. They too must apply jointly under the first proviso to Section 7(1).

Admission and Its Consequences – Sections 13 and 14

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The date of admission is the insolvency commencement date. Under Section 13 the NCLT at once declares a moratorium, appoints an IRP, and causes a public announcement calling for claims, which the professional must make within 3 days.

The moratorium – Section 14

The "calm period" of the Code prohibits:

1. suits and proceedings against the company, including execution of decrees;
2. transfer or disposal of its assets by the company;
3. enforcement of any security interest, including under the SARFAESI Act;
4. recovery of property by an owner or lessor from the company's possession.

• Essential supplies cannot be cut off; critical supplies cannot be while their moratorium dues are paid.
• A licence cannot be cancelled merely because of insolvency if current dues are paid.
• A surety is not protected: lenders may proceed against a guarantor. The 2026 amendment clarifies that a surety cannot sue the company on his guarantee during the moratorium.
• It lasts until the NCLT approves a plan or orders liquidation.

The interim resolution professional – Sections 17, 18 and 20

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• Section 17: takes over management; the board's powers stand suspended.
• Section 18: collects information; receives, collates and (as clarified in 2026) verifies claims; controls all assets, including those abroad, but not subsidiaries' assets.
• Section 20: runs the company as a going concern; may raise interim finance.
• All who worked for or managed the company must cooperate.
• Claims are usually due within 14 days of his appointment and verified within 7 days; he then constitutes the CoC, whose first meeting is held within 7 days.

Withdrawal of an Admitted Application – Section 12A

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Section 12A (2018), recommended by the Insolvency Law Committee, let the NCLT permit withdrawal of an application admitted under Section 7, 9 or 10 with approval of 90% of the CoC's voting share. Swiss Ribbons upheld the 90% rule as Parliament's policy choice, noting that before the CoC was formed the parties could approach the NCLT directly, which could allow a settlement using its inherent powers.

Section 12A as rewritten in 2026

• The RP applies, with approval of 90% of the CoC's voting share.
• No withdrawal before the CoC is constituted: nobody can yet speak for all creditors.
• No withdrawal after the RP's first invitation for resolution plans: bidders spend time and money, so the process should not be called off at will.
• The NCLT decides within 30 days or records reasons for delay.

The Committee of Creditors – Section 21

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The CoC is the brain of the process. Creditors are all those to whom the company owes money: banks, bondholders, homebuyers, suppliers, employees and the government; once a company cannot pay, its remaining value belongs to the creditors, who bear the loss.

Why only financial creditors

• Section 21(2): the CoC comprises all financial creditors, usually the largest creditors, who assess viability and can restructure debt.
• Operational creditors do not vote, but Section 30 guarantees them a minimum, and a representative may attend if their dues together reach 10% of the debt.
• With no financial creditors, the CoC is formed of the largest operational creditors and representatives of workmen and employees (Unit 5).

The related party bar – first proviso to Section 21(2)

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A financial creditor that is a related party has no right of representation, participation or voting; otherwise a promoter could lend through a friendly firm and control the CoC. Exception: a regulated financial institution that became a related party only by converting debt into shares before the insolvency.

Voting in the CoC

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Votes follow voting share: each financial creditor's share of the financial debt owed to creditors eligible to vote.

Decision	Voting share
Ordinary decisions (Section 21(8))	51%
Appointing or replacing the RP; extending the process; major actions under Section 28; approving a plan; deciding to liquidate	66%
Withdrawal (Section 12A)	90%

• At least 5 days' notice; quorum 33% of voting rights; suspended directors may attend without a vote.
• Since 2026, the Board can set standards of conduct for committees, including decision timelines.
• Functions: confirming or replacing the IRP; approving criteria for inviting resolution applicants; approving or rejecting plans; deciding to liquidate; and, since 2026, supervising the liquidator during liquidation.

The Commercial Wisdom of the Committee of Creditors

Courts call the CoC's decisions on the merits of a plan its commercial wisdom.

K. Sashidhar v. Indian Overseas Bank (2019)

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Since 2026, Section 30(4) requires reasons when the CoC approves a plan.

Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta (2019)

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The Bhushan Power and Steel litigation (2025)

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The Resolution Process and the Resolution Plan

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Under Sections 23 and 25 the RP conducts the process: takes custody of assets, represents the company, raises interim finance with CoC approval, keeps an updated list of claims, convenes CoC meetings and files applications against avoidance transactions. Under Section 29 he prepares an information memorandum (open to serious bidders who promise confidentiality). Under Section 25(2)(h) read with Regulation 36A of the CIRP Regulations, he publishes, not later than the 60th day from the insolvency commencement date, an invitation for expressions of interest from prospective resolution applicants meeting CoC-approved criteria.

Ineligible resolution applicants – Section 29A

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Inserted in 2017, refined in 2018. Ineligible:

• an undischarged insolvent; a wilful defaulter;
• a person whose account has been a non-performing asset for at least a year, unless overdue amounts are paid before submitting the plan;
• a person convicted of certain offences; a disqualified director; a person barred by the Securities and Exchange Board of India;
• a person whose guarantee for the company has been invoked and remains unpaid;
• any connected person of these.

Purpose: promoters who drove the company into default should not buy it back at a discount. Financial entities that are not related parties get some relief.

Contents of a resolution plan – Section 30(2)

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The RP checks that every plan:

1. pays insolvency process costs first;
2. pays operational creditors at least the higher of the two amounts;
3. since 2026, pays dissenting financial creditors at least the lower of them;
4. provides for management after approval;
5. provides for implementation and supervision (the CoC must consider a monitoring committee);
6. breaks no law; and
7. meets the regulations.

Tools: sale of assets, merger or demerger, debt reduction, extension of repayment dates, issue of new shares.

Section 30(4): the CoC may approve by at least 66%, considering feasibility and viability and the manner of distribution, which may reflect creditors' order of priority, including the priority and value of security interests. Since 2026 it must record reasons for approval.

NCLT approval – Sections 31 and 32A

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• The NCLT approves a plan meeting Section 30 with provisions for effective implementation; since 2026, within 30 days or with recorded reasons for delay.
• It may first ask the CoC to rectify defects before rejecting, and may approve implementation first and distribution later.
• Binding effect: the company, employees, members, creditors, guarantors and other stakeholders, including Central and State Governments and local authorities owed statutory dues.
• Section 31(6) (2026): pre-approval claims under other laws against the company and its assets are extinguished unless the plan provides otherwise; no proceeding may continue or begin on them; promoters, guarantors and co-obligors are not released.
• Licences and permits associated with the plan cannot be suspended or cancelled if their conditions are met.
• Section 32A: when control passes to a new, unconnected owner, the company is immune from prosecution for pre-process offences and its assets from attachment; the individuals who committed the offences remain liable.

Appeal and other approvals

• Section 61(3): an appeal to the NCLAT lies only if the plan contravenes a law, the RP committed a material irregularity, operational creditors were not paid as required, process costs were not given priority, or the plan breaks another requirement of the regulations.
• Approvals under other laws must be obtained within one year, or any longer period the relevant law allows.
• Since 2026, for a combination under the Competition Act, the Competition Commission's approval must precede submission of the plan to the NCLT.

Resolution Applicant and Corporate Debtor Compared

Corporate debtor	Resolution applicant
The company in distress whose insolvency is being resolved	The outsider (investor or rival company) offering a plan to take over or revive it
In a pre-packaged process (Unit 5), offers the base plan itself	May attend the CoC meeting on its plan but cannot vote unless also a financial creditor

The CIRP from Start to Finish: An Illustration

Unit 4: Corporate Restructuring

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A rescue does not always need the Code. The tools of corporate restructuring work both inside and outside insolvency.

Meaning and kinds

• Financial restructuring changes the money side of the company: its debts and its share capital.
• Organisational or business restructuring changes the shape of the company itself: mergers, demergers, the sale of a division or a change in management.

Importance

Like a disease, financial distress is easier to treat early. Debts restructured early, while the business is still running, may save the company cheaply and quickly. If nothing is done until default, the full insolvency process may be needed, and if that fails, liquidation. Restructuring thus preserves a business that would otherwise move towards liquidation, saving jobs and giving creditors more than a forced sale would.

Debt and Equity Restructuring

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Debt restructuring

The lender may extend the repayment period, reduce the rate of interest, forgive part of the principal (a haircut), convert part of the debt into shares, or replace an old loan with a new one on easier terms.

Informal route: the RBI framework

Restructuring may be informal, by agreement between the company and its lenders under the guidance of the Reserve Bank of India.

• RBI framework of June 2019, now carried into its directions of November 2025.
• Lenders must review a defaulting borrower's account within 30 days.
• If they choose a resolution plan, they sign an inter-creditor agreement.
• A decision supported by lenders holding 75% by value and 60% by number binds all of them.
• For large accounts, the plan should be implemented within 180 days.
• It replaced older schemes such as corporate debt restructuring and the joint lenders' forum.

Formal route

• A compromise or arrangement under Section 230 of the Companies Act may include a scheme of corporate debt restructuring agreed by at least 75% of the secured creditors in value.
• A resolution plan under the Code may reduce debts, extend maturity dates, change interest rates or modify security interests.

Equity restructuring

Equity restructuring changes the share capital or the ownership of the company.

• Reduction of share capital (Section 66, Companies Act), for example by cancelling capital that has been lost or is not represented by available assets. It needs a special resolution and the confirmation of the Tribunal, which first protects the creditors.
• Buy-back of shares; consolidation or division of shares; conversion of debt into equity; issue of fresh shares to a new investor.

In a resolution plan, equity restructuring is very common: the plan may cancel or delist the old shares and issue new shares to the resolution applicant. Any shareholders' approval needed is deemed to have been given, so the old shareholders cannot block the rescue.

Formal Restructuring and Insolvency Proceedings

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Informal restructuring	Formal restructuring
Quick and cheap.	Slower; supervised by a tribunal.
Binds only those who join it; one stubborn creditor outside it can destroy it.	Binds the dissenting minority.

India has three main formal routes:

1. a scheme of compromise or arrangement under Section 230;
2. a resolution plan under the Code;
3. a pre-packaged plan for micro, small and medium enterprises.

Section 230 scheme and resolution plan compared

Point	Scheme under Section 230	Resolution plan under the Code
When	Any time, even by a healthy company.	Needs a default of at least ₹1 crore.
Management	Stays in charge.	A resolution professional takes over.
Moratorium	None automatically.	Arises at once.
Approval	Majority in number representing three-fourths in value of each class of creditors or members, plus sanction of the Tribunal.	66% of the voting share of the committee of creditors, plus approval of the NCLT.
Purpose	Many purposes, from a simple merger to a debt rescue.	Only to resolve insolvency.

Section 230 scheme proposed by a liquidator under the Code

A liquidator appointed under the Code may propose a compromise or arrangement under Section 230.

• The liquidation regulations allow this only if the committee of creditors recommended it during the insolvency process.
• It must be filed within 30 days of the start of liquidation and completed within 90 days.
• Since June 2026, it must also be approved by the statutory majority and must give creditors more than the liquidation value.

Arun Kumar Jagatramka v. Jindal Steel and Power Limited (2021)

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Compromises and Arrangements: Section 230

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Compromise	Arrangement
A settlement of a dispute or claim between the company and its creditors or members.	Wider: any reorganisation of their rights, including a reorganisation of share capital.

Who may apply (Section 230(1)): the company, any creditor, any member, or a liquidator appointed under the Companies Act or under the Code. The Tribunal then orders meetings of the relevant classes of creditors or members.

Safeguards of fairness

• The applicant must disclose all material facts on affidavit.
• The notice of the meeting must carry the valuation report and explain the effect of the scheme on every group.
• To stop small groups blocking schemes, an objection can be raised only by persons holding at least 10% of the shareholding or at least 5% of the total outstanding debt.
• Regulators such as the RBI, SEBI and the tax authorities receive notice and may respond within 30 days.

Approval, binding effect and supervision

• Approval needs a majority in number representing three-fourths in value of each class voting.
• With that majority and the Tribunal's sanction, the scheme binds the company and all creditors and members of that class, including those who voted against it.
• The Tribunal may dispense with a creditors' meeting if creditors holding 90% in value agree by affidavit.
• Section 231: the Tribunal supervises implementation; if the scheme cannot be worked and the company cannot pay its debts under it, the Tribunal may order winding up.

Role of the court in sanctioning a scheme

Two classic Supreme Court cases, decided under the matching sections of the Companies Act, 1956, answer this question.

Hindustan Lever Employees' Union v. Hindustan Lever Limited (1994)

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Miheer H. Mafatlal v. Mafatlal Industries Limited (1996)

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The court must check that:

1. the statutory procedure has been followed;
2. the required majority has approved the scheme;
3. the voters had all the material needed for an informed decision;
4. the scheme does not violate any law or public policy (the court may look behind its apparent purpose to its real nature);
5. the majority acted in good faith and did not coerce the minority;
6. the scheme is just, fair and reasonable from the point of view of a prudent businessman.

Mergers, Amalgamations and Demergers: Section 232

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Section 232 of the Companies Act deals with schemes of reconstruction and amalgamation. Its Explanation defines:

• Merger by absorption: the undertaking, property and liabilities of one or more companies are transferred to another existing company.
• Merger by formation of a new company: those of two or more companies are transferred to a new company.
• Division: those of a company are divided among two or more companies; in business language, a demerger.

Merger, amalgamation and demerger compared

Merger	Amalgamation	Demerger
One company swallows another; the transferee survives.	Two or more companies join to form a new company; the old ones disappear.	One company splits; part of its business goes to another company.

In practice, "merger" and "amalgamation" are often used loosely. The distinction matters because it decides which companies survive, who holds which shares, and which company carries which debts.

Procedure and effect of a Section 232 scheme

• Same meetings and approvals as under Section 230, with a report on the share exchange ratio and an expert's valuation.
• On the Tribunal's sanction, the property and liabilities of the transferor pass to the transferee by force of the order.
• Legal proceedings continue against the transferee; employees are transferred.
• The transferor company is dissolved without winding up.
• The scheme must state an appointed date from which it takes effect.

Merger and takeover

Merger	Takeover
The target company itself disappears.	The buyer acquires control by purchasing shares; the target company continues to exist.

A resolution applicant acquiring a listed company under a plan approved under Section 31 is exempted by the SEBI takeover regulations from making an open offer to the public shareholders.

Fast Track Mergers: Section 233

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A Tribunal merger can take many months. For simple cases, Section 233 offers a fast track merger, approved by the Central Government through its Regional Director, without the Tribunal.

Who can use it

• Two or more small companies.
• A holding company and its wholly owned subsidiary.
• Other classes of companies prescribed by rules.
• Since 2021: two or more start-up companies, or a start-up with a small company.
• Since September 2024: a foreign holding company merging into its Indian wholly owned subsidiary, with RBI approval.
• Amendment of September 2025: (i) unlisted companies, each with outstanding loans, debentures and deposits of not more than ₹200 crore and no default on them; (ii) a holding company and its subsidiary, where the transferor is not listed; (iii) two or more subsidiaries of the same holding company, where the transferor is not listed. The same amendment extended the route to demergers.

Procedure

1. Objections are invited from the Registrar of Companies and the Official Liquidator, who get 30 days.
2. Approval by members holding at least 90% of the total number of shares, and by creditors representing nine-tenths in value.
3. Each company files a declaration of solvency.
4. The scheme is filed with the Central Government, the Registrar and the Official Liquidator.
5. With no objection, the Central Government confirms it; if it does nothing within 60 days, it is deemed to have no objection.
6. If it thinks the scheme is not in the public interest or in the interest of creditors, it may, within 60 days, ask the Tribunal to consider it as an ordinary scheme.
7. Registration of the scheme dissolves the transferor company without winding up.

A Bill pending in Parliament in 2026 proposes to lower these approval thresholds to 75%; it is not yet law.

Cross-Border Mergers: Section 234

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Section 234 of the Companies Act, in force from 13 April 2017, allows mergers between Indian and foreign companies.

• Inbound merger: a foreign company merges into an Indian company. Outbound merger: an Indian company merges into a foreign company.
• Prior RBI approval is needed, but a merger complying with its foreign exchange regulations for cross-border mergers is deemed approved.
• For an outbound merger, the foreign company must belong to a jurisdiction meeting the conditions in the rules, such as cooperation by its securities regulator and compliance with international standards against money laundering.
• Consideration may be paid in cash, in depository receipts, or partly in each.

Compulsory Mergers: Section 237

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Where the Central Government is satisfied that it is essential in the public interest that two or more companies should amalgamate, it may order their amalgamation by a notified order.

• Every member and creditor of the transferor must receive, as nearly as possible, the same interest and rights in the merged company.
• Those who get less are paid compensation fixed by a prescribed authority, and may appeal to the Tribunal within 30 days.
• The draft order must first be sent to the companies and their objections considered.

The power is carefully guarded, because a merger forced on unwilling members is a serious intrusion into private property.

63 Moons Technologies Limited v. Union of India (2019)

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Sale of Assets under the Insolvency and Bankruptcy Code

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Sale during the insolvency process

• A resolution plan may provide for the transfer or sale of all or part of the company's assets, whether or not subject to a security interest.
• The regulations allow a plan to sell one or more assets to one or more successful resolution applicants, with the manner of dealing with the remaining assets.
• Since 2026, the Explanation to Section 5(26) allows a resolution plan to include the sale of one or more assets through one or more plans by one or more resolution applicants, on conditions to be specified.

Haldiram Incorporation Private Limited v. Amrit Hatcheries Private Limited (2023)

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Sale in liquidation: Section 35

In liquidation, the liquidator sells the assets under Section 35 (Unit 6), ordinarily by public auction. He may sell an asset on a standalone basis, sell the assets in a slump sale, sell a set of assets collectively, or sell them in parcels. He cannot sell to a person ineligible under Section 29A, and can sell a secured asset only if the secured creditor has relinquished it to the estate.

Going concern sale removed from liquidation

Until October 2025, the liquidator could also sell the corporate debtor, or its business, as a going concern, so that the buyer took over a running entity. On 14 October 2025, the Board omitted these modes from the liquidation regulations, for sales not yet begun. Its earlier discussion paper explained that a going concern sale does not fit the very idea of liquidation, which must end in the dissolution of the company.

Perfect Day Incorporated v. Ms Mamta Binani (2022)

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Unit 5: Fast Track Insolvency Resolution Process

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Why a faster route

The ordinary process (Unit 3) can run for 180 days, and much longer with extensions and court battles. Its costs (fees, valuations, meetings, notices) can eat up most of what a small business is worth, and a small business loses customers and workers quickly once it stops running. The Code gave two answers at different times:

1. the fast track corporate insolvency resolution process, enacted in 2016;
2. the pre-packaged insolvency resolution process, added in 2021 for micro, small and medium enterprises.

The fast track process as enacted: Sections 55 to 58

It was placed in Chapter IV of Part II of the Code.

• Section 55 (eligibility): the Central Government could notify the companies eligible, by assets and income below a certain level, by class of creditors or amount of debt, or any other category. A notification of 14 June 2017 named: (i) a small company as defined in the Companies Act, 2013; (ii) a startup, other than a partnership firm, as defined by the Government of India; (iii) an unlisted company whose total assets, in its financial statements for the preceding financial year, did not exceed ₹1 crore.
• Section 56 (time): completion within 90 days of the insolvency commencement date. The resolution professional could seek more time if the committee of creditors so resolved by 75% of the voting share. The Tribunal could extend only once, by not more than 45 days: outer limit 135 days.
• Section 57 (application): a creditor or the corporate debtor could apply, with proof of default from an information utility or other specified record, and information showing the company was eligible.
• Section 58: applied the process and the offences of the ordinary insolvency process, as the context required.

Building blocks of the fast track process

Because Section 58 borrowed the machinery of the ordinary process, these building blocks still run every ordinary insolvency process today.

1. Committee of only operational creditors (Regulation 16)

Where a company has no financial debt, or all its financial creditors are its related parties, the committee consists of:

• the 18 largest operational creditors by value who are not related parties (all of them, if fewer than 18);
• one representative elected by all the workmen, and one elected by all the employees, who are not already members.

Each member votes in proportion to the debt due to him, or the debt he represents.

2. Meetings: notice and quorum (Regulations 19 and 22)

• Notice: at least five days in writing to every participant, by electronic means. The committee may shorten it, but not below 24 hours, or 48 hours if there is an authorised representative.
• Quorum: members holding at least 33% of the voting rights, present in person or by video conferencing.
• A meeting failing for want of quorum stands adjourned to the same time and place the next day, unless the committee has previously decided otherwise; the adjourned meeting is quorate with whoever attends. So one absent bank cannot block the process by staying away.

3. Registered valuers (Regulation 27)

A registered valuer is a professional registered under Chapter XVII of the Companies Act, 2013, to value assets; the 2026 amendment has brought this definition into the Code itself. The resolution professional must appoint two sets of registered valuers within seven days of his own appointment, and not later than the 47th day from the insolvency commencement date. For a micro, small or medium enterprise, one set is enough, unless the committee decides otherwise.

Fair value	Liquidation value
Realisable value of the company or its assets if sold on the commencement date between a willing buyer and a willing seller, at arm's length, after proper marketing.	Realisable value of the assets if the company were liquidated on that date.
Shows what the business could fetch in a normal sale.	Shows what creditors might get in a liquidation.

4. The resolution plan

It had to satisfy Section 30 and be approved by the committee and then by the Tribunal under Section 31 (Unit 3).

5. Extension of the process period

As under Section 56 above.

Fast Track Process Omitted and Chapter IV-A

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The Insolvency and Bankruptcy Code (Amendment) Act, 2026 omitted Chapter IV of Part II with effect from 26 May 2026, so no new fast track process can be started.

Creditor-initiated insolvency resolution process (Sections 58A to 58K)

The same amendment inserted Chapter IV-A, the creditor-initiated insolvency resolution process:

• A financial creditor belonging to a class of financial institutions notified by the Government could start the process without first going to the Tribunal.
• It would need the approval of such financial institutions holding 51% of the debt due to them, and would have to give the company at least 30 days to make a representation.
• The company's board would continue to manage it, under the eye of a resolution professional who could reject its resolutions.
• The process would have to finish within 150 days, extendable once by 45 days.

Ordinary process and fast track process compared

Point	Ordinary process	Fast track process
Eligibility	Every corporate debtor with a default of at least ₹1 crore.	Only the notified small categories.
Time	180 days, extendable once by 90 days, within an outer limit of 330 days.	90 days, extendable once by 45 days.
Vote for extension	66%	Remained 75%
Steps	The ordinary steps.	The same, because Section 58 borrowed them.
Status	Living law.	Omitted.

Pre-Packaged Insolvency Resolution Process: Sections 54A to 54P

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A sub-committee of the Insolvency Law Committee recommended the framework. It came by an Ordinance of 4 April 2021, replaced by the Insolvency and Bankruptcy Code (Amendment) Act, 2021, which inserted Chapter III-A (Sections 54A to 54P). It began with small enterprises because they depend heavily on their promoters and can least afford a long process in which the promoter loses control from the first day.

Eligibility: Section 54A

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1. The corporate debtor is classified as a micro, small or medium enterprise under the Micro, Small and Medium Enterprises Development Act, 2006.
2. It has committed a default; the minimum default is ₹10 lakh (notification of 9 April 2021).
3. It has not gone through a pre-packaged process, or completed an ordinary insolvency process, in the three years before the initiation date.
4. It is not undergoing an ordinary insolvency process, and no liquidation order has been passed against it.
5. It is itself eligible to submit a resolution plan under Section 29A.

Four steps before filing

1. The financial creditors who are not related parties propose and approve the name of the insolvency professional who will act as resolution professional.
2. A majority of the directors declare that the company will file within a definite period of not more than 90 days, that the process is not meant to defraud anyone, and name the proposed professional.
3. The members pass a special resolution (in a limited liability partnership, at least three-fourths of the partners approve).
4. The unrelated financial creditors approve the filing itself.

These creditor approvals earlier needed creditors holding 66% of the financial debt due to them; since 26 May 2026 (2026 amendment), 51% is enough. Before seeking approval, the company must give these creditors a base resolution plan, its own rescue plan. Under Section 54B, the proposed professional must confirm whether the company is eligible and whether the base plan meets the legal requirements.

The process step by step

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• Section 54C: the corporate applicant files the application. The Tribunal must admit or reject it within 14 days, giving seven days to cure any defect before rejecting.
• On admission, the Tribunal declares a moratorium, appoints the resolution professional and has the process publicly announced.
• Within two days, the company gives the resolution professional a list of claims and a preliminary information memorandum. If misleading or incomplete, the promoters and directors responsible must compensate anyone who suffers loss.
• The committee of creditors is constituted within seven days.
• Section 54H (debtor in possession): the board of directors or partners continues to manage the company; it must protect the company's value and run it as a going concern. The resolution professional monitors the management, confirms the claims and files applications against avoidance transactions.
• Section 54J: if the management misbehaves, the committee may resolve by 66% to hand management to the resolution professional; the Tribunal will do so if it finds the affairs were conducted fraudulently or there was gross mismanagement.

Base resolution plan and Swiss challenge: Section 54K

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1. The company submits its base plan within two days of the start of the process; the committee may let it improve the plan.
2. If the base plan does not impair (cut down) the claims of operational creditors, the committee may approve it directly.
3. If the committee does not approve it, or it cuts operational creditors' dues, the resolution professional must invite other plans to compete with it: a Swiss challenge.
4. The best outside plan is selected; if the committee finds it significantly better than the base plan, it may be approved.
5. Otherwise, the two plans compete once more and one is selected.

Any approval needs 66% of the voting share. Where the base plan impairs claims, the committee may require the promoters to dilute their shareholding or control; approving such a plan without dilution requires recorded reasons.

Time limits, termination and conversion

• Section 54D: the whole process must be completed within 120 days. The committee-approved plan must reach the Tribunal within 90 days, and the Tribunal must decide within 30 days.
• If no plan is approved within 90 days, the resolution professional must apply to terminate the process.
• The committee may terminate it by 66% at any time before a plan is approved, or by the same majority convert it into an ordinary insolvency process, if the company is eligible.
• Safeguard: if management was handed to the resolution professional for fraud or gross mismanagement, and the approved plan would still leave the old promoters or managers in control, the Tribunal must reject the plan and order liquidation.

Ordinary process and pre-packaged process compared

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Point	Ordinary process	Pre-packaged process
Who begins it	Any financial creditor, operational creditor or the company itself.	Only the company, with creditor approval.
Coverage	Every corporate debtor with a default of ₹1 crore or more.	Only micro, small and medium enterprises with a default of ₹10 lakh or more.
Management	Board suspended; resolution professional takes control.	Board stays in control under monitoring.
Plan	Plans invited from the market after admission.	Starts with the company's base plan, tested by a Swiss challenge where needed.
Time	180 days, with extensions.	120 days.

Unit 6: Liquidation of a Corporate Person

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When nobody wants to revive a company and its creditors cannot agree on any plan, the company cannot be left hanging forever: its machines rust and its creditors wait without end. The law's final route is liquidation.

Purpose of liquidation

1. To get the best price for whatever is left.
2. To distribute that money fairly, so that the fastest creditor does not grab everything.
3. To release the land, machines and workers of a failed business for fresh use in the economy.

Under the Code, liquidation is the last stop, not the first; it usually begins when resolution fails. It is governed by Chapter III of Part II (Sections 33 to 54).

Resolution, Liquidation, Winding Up and Dissolution

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Term	Meaning
Resolution	The company survives. A resolution plan rescues it, often under a new owner, and the business continues as a going concern.
Liquidation	The company does not survive as a business. Its assets are sold and the money is distributed.
Dissolution	The final legal death of the company; it no longer exists as a legal person.
Winding up	The older word of company law, now used for closure by the Tribunal under the Companies Act, 2013 on grounds other than inability to pay debts.

Where winding up fits after the Code

Before 2016, a company that could not pay its debts was wound up by a High Court. The Code changed this: inability to pay debts is no longer a ground for winding up under the Companies Act, 2013; that case now goes to the Code. Section 271 of the Companies Act still allows the Tribunal to wind up a company where:

• the company passes a special resolution to be wound up by the Tribunal;
• it has acted against the sovereignty and integrity of India;
• its affairs have been run in a fraudulent manner;
• it has not filed its financial statements or annual returns for five continuous years; or
• it is just and equitable to wind it up.

The Companies Act now defines winding up to include liquidation under the Code.

Voluntary liquidation: Section 59

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A healthy company that has not committed any default may choose to close through voluntary liquidation under Section 59.

• A majority of its directors must declare that it has no debt, or will pay all its debts from the sale of its assets.
• The members must pass a special resolution.
• If the company owes debts, creditors holding two-thirds of their value must also approve.
• Since 2026, it must be completed within the period fixed by regulations, which cannot exceed one year.
• Before dissolution is sought, the members may terminate it by special resolution, with the same creditor approval.

When Liquidation May Begin: Section 33

▶ Watch this part of the lecture (2:13:40)

The NCLT must order liquidation of an insolvent company:

1. when the insolvency process ends without any resolution plan reaching the NCLT in time;
2. when the NCLT rejects a resolution plan for not meeting the requirements of the Code;
3. when the committee of creditors decides, by at least 66% of the voting share, to liquidate. It may do so at any time after it is formed and before the plan is confirmed, even before the information memorandum is prepared. Since 2026, it may also decide to dissolve the company, subject to conditions fixed by the Board;
4. when an approved resolution plan is broken by the company and a person harmed by the breach applies. Since 2026, the NCLT may instead reinstate the insolvency process.

A second chance: Section 33(1A)

• Added by the 2026 amendment: the committee of creditors may apply, by 66% of the voting share, to restore the insolvency process.
• Available only when the first or second ground for liquidation exists.
• No plan received: the NCLT may restore the process for up to 120 days.
• Plan rejected: it may restore the process to the stage of inviting resolution plans, again for up to 120 days.
• Allowed only once; if the second attempt also fails, liquidation must follow.
• The NCLT must pass the liquidation order within 30 days of the request to liquidate, or record its reasons for the delay.

Effects of the liquidation order

• The company is publicly announced to be in liquidation.
• A moratorium blocks suits against the company and the enforcement of security interests, subject to the special rights of secured creditors.
• The liquidator cannot start or continue a suit for the company without the leave of the NCLT.
• The order works as a notice of discharge to the officers, employees and workmen, unless the liquidator continues the business.

Appointment of the Liquidator: Section 34

▶ Watch this part of the lecture (2:15:53)

The liquidation is run by a liquidator, who must be a registered insolvency professional. Earlier, the resolution professional of the failed process usually became the liquidator. The 2026 amendment changed this. Under the new Section 34:

1. The NCLT refers the matter to the Insolvency and Bankruptcy Board of India (the Board).
2. The Board proposes an insolvency professional, with his written consent, within 10 days, and the NCLT appoints him.
3. Under the regulations, the committee of creditors also recommends a name from a panel of the Board, by 66%, before the liquidation order, and the NCLT considers it.
4. Section 34(4): the resolution professional of the company cannot be appointed as its liquidator.

On appointment, all the powers of the board of directors, key managerial personnel and partners vest in the liquidator, and everyone who worked for or managed the company must cooperate with him.

Replacement (new Section 34A): the committee of creditors may replace the liquidator, by 66%, with another professional who consents. The NCLT then appoints him, if no disciplinary proceeding is pending against him.

The gap between CIRP and liquidation

A period students often forget: the insolvency process period has ended, but the NCLT has not yet decided whether to approve a plan or order liquidation.

• Proviso to Section 23(1): the resolution professional continues to manage the operations of the company after the process period expires, until the NCLT approves a resolution plan or appoints a liquidator.
• Section 34(5): on the liquidator's appointment, the resolution professional must hand over to him all the records of the insolvency process.

Powers and Duties of the Liquidator: Section 35

▶ Watch this part of the lecture (2:17:58)

Subject to the directions of the NCLT, the liquidator:

• maintains an updated list of the claims of creditors;
• takes custody or control of all the assets and actionable claims of the company, gets them valued, and protects them;
• may carry on the business, if that helps a better liquidation;
• sells the property of the company by public auction or private contract, as a whole or in parcels;
• settles claims and distributes the proceeds;
• files or defends legal proceedings in the name of the company;
• continues or starts proceedings against avoidance transactions and fraudulent or wrongful trading; and
• reports the progress of the liquidation to the NCLT.

Limits on sale

• He cannot sell company property to any person ineligible to be a resolution applicant under Section 29A. Otherwise, the promoters who ran the company into the ground could buy back its assets cheaply through the back door.
• Under the regulations, he ordinarily sells by auction. A private sale is allowed only in limited cases, such as perishable goods, with the approval of 66% of the committee, and never to a related party.

Supervision of the liquidator

Since 2026, under Sections 21(11) and 35(2), the committee of creditors continues during liquidation and supervises its conduct. The Board may let other classes of creditors attend its meetings without a vote. The old stakeholders' consultation committee, whose advice did not bind the liquidator, has been dropped from the regulations.

The Liquidation Estate: Section 36

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The liquidator gathers the assets into a common pool, the liquidation estate, which he holds as a fiduciary for all the creditors.

Included in the estate	Excluded from the estate
Every asset over which the company has ownership rights, whether or not in its possession: land, machines, intellectual property, shares in subsidiaries, insurance policies and contractual rights.	Assets of third parties lying with the company, such as goods held in trust or under bailment.
Assets recovered through avoidance or trading proceedings.	All sums due to workmen or employees from the provident fund, the pension fund and the gratuity fund.
Assets on which a secured creditor has given up its security.	Assets of any Indian or foreign subsidiary, because a subsidiary is a separate company.
All the money realised.	Personal assets of a shareholder or partner, unless moved through an avoidable transaction.

Claims in Liquidation

▶ Watch this part of the lecture (2:21:15)

Both the old and the new law must be known. Claims were already collected and verified during the insolvency process, so to end this duplication the 2026 amendment omitted Sections 38 to 42. They still govern a liquidation that began on or before 26 May 2026.

Point	Old law: Sections 38 to 42 as enacted	New law: liquidations after 26 May 2026
Collection	Liquidator collected claims within 30 days of the start of liquidation.	Liquidator maintains an updated list of claims. A creditor who never claimed during the insolvency process may claim within 14 days of the start of liquidation.
Proof	Financial creditors through information utility records; operational creditors through documents. A claim could be withdrawn or varied within 14 days.	A claim already verified during the insolvency process is not verified again.
Verification and decision	Each claim verified, admitted or rejected with reasons, and the decision communicated within 7 days; admitted claims then valued.	A fresh claim is verified within 7 days, admitted or rejected with reasons, and the creditor informed.
Final step	Appeal against the liquidator's decision to the NCLT within 14 days.	List of stakeholders filed with the NCLT within 30 days of the last date for claims.

Avoidance Transactions

A promoter who knows his company is sinking may, months before insolvency, sell a valuable company building to his brother at a throwaway price, or repay his own friend's loan in full while banks and suppliers get nothing. As this is unfair to other creditors, the resolution professional or the liquidator may ask the NCLT to undo such transactions.

1. Preferential transactions: Sections 43 and 44

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A company gives a preference when it transfers property for the benefit of a creditor, surety or guarantor, for an old debt, and the transfer puts that person in a better position than he would have had in a liquidation under Section 53.

• Not a preference: a transfer in the ordinary course of business; or a security for new value used to buy the very property secured, if registered with an information utility within 30 days.
• Look-back period: two years for a related party, one year for others. Since 2026, counted from two years (or one year) before the initiation date (date of filing) up to the insolvency commencement date (date of admission).
• Orders: property returned, a security released or the benefit repaid.
• Protection: a person who received a benefit in good faith and for value.

2. Undervalued transactions: Sections 45 to 48

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The company makes a gift, or transfers an asset for a consideration significantly less than its value, outside the ordinary course of business. The look-back period is the same (one year, or two years for a related party). The NCLT may ask an independent expert to assess the value, and may order the property returned or the proper price paid.

3. Transactions defrauding creditors: Section 49

▶ Watch this part of the lecture (2:25:16)

An undervalued transaction entered deliberately to keep assets beyond the reach of creditors or to harm their claims. There is no look-back period, because fraud can be old. The NCLT restores the earlier position, but protects a person who acquired the property in good faith, for value and without notice, from anyone other than the company or its related party.

4. Extortionate credit transactions: Sections 50 and 51

▶ Watch this part of the lecture (2:25:44)

Credit taken by the company, from two years before the initiation date up to the commencement date, on terms requiring exorbitant payments. Credit given by a financial service provider in compliance with law can never be extortionate. The NCLT can set aside the debt, modify its terms or order repayment.

Application by others and effect on the process: Sections 47 and 26

• New Section 47: if the professional fails to report an avoidance transaction, or fraudulent or wrongful trading, a creditor, member or partner may apply directly to the NCLT. If the NCLT finds that it occurred, it passes the same orders as on the professional's application. If the professional had enough information but stayed silent, the NCLT directs the Board to start disciplinary proceedings against him.
• New Section 26: filing an avoidance or trading application does not stop the insolvency process or the liquidation, and the case continues even after either process ends.

Prohibited Transactions

Some transactions are not merely undone later; the Code forbids them or declares them void.

1. During the moratorium, the company cannot transfer, encumber or dispose of its assets.
2. The resolution professional cannot take the major actions listed in Section 28 (raising extra finance, creating security, changing the capital structure, entering a related party transaction and others) without the prior approval of 66% of the committee. An action taken without it is void.
3. The liquidator cannot sell assets to a person ineligible under Section 29A.
4. Any contract between creditors of equal rank that disturbs the order of priority in Section 53 is disregarded.
5. Officers of the company commit offences if they conceal company property, falsify its books or make false representations to creditors.

Secured Creditors in Liquidation: Section 52

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A secured creditor holds a mortgage, hypothecation or other security over an asset of the company. Under Section 52 it may either:

1. relinquish (give up) its security to the estate and share in the general distribution; or
2. realise its security by itself, selling the asset outside the liquidation.

Tighter rules for liquidations starting after 26 May 2026

• A secured creditor wishing to realise must inform the liquidator and identify the asset within 14 days from the start of liquidation; otherwise its security is deemed relinquished.
• Where several secured creditors hold security over the same asset, it can be realised only if those holding at least 66% of the value of those secured claims agree.
• A realising creditor must hand over to the liquidator amounts towards the insolvency costs, the liquidation costs and the workmen's dues, as the regulations fix, along with any surplus.
• If the sale price falls short of its debt, the unpaid part is paid at a lower level in the waterfall.

Who counts as a secured creditor

Distribution of Assets: The Waterfall under Section 53

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Section 53 is the heart of liquidation. Like a waterfall, money flows from the top, and each level must be filled before anything reaches the next. It applies notwithstanding any other law made by Parliament or a State legislature.

1. Insolvency resolution process costs and liquidation costs, paid in full.
2. Ranking equally: workmen's dues for the 24 months before liquidation, and debts of secured creditors who relinquished their security.
3. Wages and unpaid dues of other employees for the 12 months before liquidation.
4. Financial debts owed to unsecured creditors.
5. Ranking equally: dues to the Central and State Governments for the two years before liquidation, and the unpaid part of debts of secured creditors who realised their security.
6. All remaining debts and dues.
7. Preference shareholders.
8. Equity shareholders or partners.

Three rules that make it work

1. Creditors at the same level are paid in the same proportion if the money is not enough.
2. The liquidator's fee is deducted proportionately from each class.
3. A contract between recipients that disrupts this order is disregarded.

Clarifications added in 2026

• A secured creditor that relinquishes a security worth less than its debt is secured only up to the value of that security, and unsecured for the rest.
• All government dues for the two years before liquidation fall at the fifth level, whether or not secured by a charge; the rest fall at the sixth level.

Dissolution of the Corporate Debtor: Section 54

▶ Watch this part of the lecture (2:32:57)

• As amended in 2026, the liquidator must liquidate the assets completely and apply to the NCLT for dissolution within 180 days from the liquidation commencement date, extendable by the NCLT, for sufficient reasons, by not more than 90 days.
• Before the application, the committee of creditors decides how any pending avoidance or trading proceedings will be pursued and their proceeds shared.
• The NCLT must pass the dissolution order within 30 days; the company is dissolved from the date of that order. A copy goes to the registering authority within 7 days.
• Shortcut: where the committee of creditors decides to dissolve the company, the NCLT may order dissolution directly. Any remaining asset is sold, the money pays the insolvency costs, and any surplus goes to the Insolvency and Bankruptcy Fund.
• A dissolution order does not stop pending proceedings for the benefit of creditors.

Liabilities of Directors Before CIRP: Fraudulent and Wrongful Trading

▶ Watch this part of the lecture (2:34:03)

Directors of a sinking company cannot keep borrowing and trading as if nothing is wrong, and then walk away. The period when insolvency is near but has not formally begun is sometimes called the twilight period. Section 66 deals with two kinds of misconduct.

Point	Fraudulent trading	Wrongful trading
Basis	Business carried on with intent to defraud creditors, or for any fraudulent purpose.	No fraud needed. (1) Before the insolvency commencement date, he knew or ought to have known that there was no reasonable prospect of avoiding the insolvency process; and (2) he did not exercise due diligence to minimise the potential loss to creditors.
Who may be ordered to contribute to the company's assets	Any person knowingly party to it.	A director or partner.

• Since 2026, the liquidator, and not only the resolution professional, may apply under Section 66.
• A resolution professional cannot apply for wrongful trading over defaults suspended during the coronavirus pandemic under Section 10A.
• Section 67: the NCLT can make the liability a charge on any debt owed by the company to that person, and if he is himself a creditor, it can push his debt below all other debts.

Other risks for directors: many give personal guarantees for company loans, and a resolution plan does not release a guarantor; and they may be prosecuted under Chapter VII of Part II for concealing property or falsifying books.

Resolution Professional and Liquidator Compared

Point	Resolution professional	Liquidator
When	During the insolvency process.	After rescue has failed.
Aim	Revival.	An orderly end.
Main tasks	Runs the company as a going concern, collects claims, convenes the committee of creditors and places resolution plans before it.	Sells the assets, maintains the list of claims, distributes the money under the waterfall and applies for dissolution.
Status	Insolvency professional regulated by the Board; supervised by the committee of creditors.	Insolvency professional regulated by the Board; now also supervised by the committee of creditors.
Same person?	Since 2026, cannot be the liquidator of the same company.	Since 2026, must be a different person from the resolution professional.

Unit 7: Cross-Border Insolvency

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Why it creates special problems

Insolvency law is national, but business is global.

1. Each country's courts have power only over assets within their own territory.
2. Each country has its own priority rules, so the same creditor may rank first in one country and last in another.
3. Local creditors may race to seize local assets: the common pool problem again, on a world scale.
4. A debtor may move its assets or headquarters to a friendly country just before insolvency.
5. A court in one country may refuse to recognise the orders of a court in another.

Territorialism, universalism and modified universalism

Approach	Meaning
Territorialism	Each country deals separately with the assets within its borders, for its own creditors.
Universalism	One main proceeding, in the debtor's home country, deals with all its assets worldwide, and other countries assist it.
Modified universalism	The middle path of most modern laws: one main proceeding, but local courts keep the power to protect local interests.

The UNCITRAL Legislative Guide on Insolvency Law

▶ Watch this part of the lecture (2:39:27)

The main international answers come from the United Nations Commission on International Trade Law (UNCITRAL). Its Legislative Guide on Insolvency Law was adopted in 2004, in two parts, and later expanded: Part Three (2010) on insolvency of enterprise groups; Part Four (2013) on obligations of directors in the period approaching insolvency; Part Five (2021) on micro and small enterprises. The Guide is not a treaty and binds no country.

Key objectives of an effective insolvency law

• Provide certainty in the market and maximise the value of assets.
• Strike a balance between liquidation and reorganisation.
• Treat similarly situated creditors equitably.
• Provide for timely, efficient and impartial resolution.
• Preserve the estate for fair distribution.
• Be transparent and predictable.
• Respect existing creditor rights, with clear rules of priority.
• Establish a framework for cross-border insolvency.

The UNCITRAL Model Law on Cross-Border Insolvency (1997)

▶ Watch this part of the lecture (2:40:42)

Adopted on 30 May 1997; the United Nations General Assembly recommended it to all States later that year.

• Adopted by more than 60 countries, including the United States, the United Kingdom, Singapore, Japan and South Africa.
• United States: Chapter 15 of its Bankruptcy Code (2005). United Kingdom: Cross-Border Insolvency Regulations (2006).
• Within the European Union, a separate regulation governs insolvency proceedings between member States.
• India has not yet adopted the Model Law.

The four pillars

1. Access

A foreign insolvency representative may apply directly to the courts of the enacting country, without complex formalities. Foreign creditors have the same rights as local creditors to start and take part in local proceedings, so they cannot be discriminated against merely because they are foreign.

2. Recognition

If the conditions are met, the local court shall recognise a foreign proceeding through a simple procedure.

Foreign main proceeding	Foreign non-main proceeding
Takes place where the debtor has its centre of main interests. Without proof to the contrary, the registered office is presumed to be the centre of main interests.	Takes place where the debtor merely has an establishment, that is, a place of operations with a lasting economic activity.

3. Relief

On recognition of a foreign main proceeding, certain relief follows automatically, such as a stay of individual actions and executions against the debtor's assets. The court may grant further discretionary relief, and even interim relief before recognition.

4. Cooperation and coordination

Courts and insolvency representatives of different countries may communicate directly, and there are rules for coordinating concurrent proceedings. Under the hotchpot rule, a creditor who has received part payment abroad is not paid again locally until other creditors of the same class have received proportionately as much.

The public policy exception

A court may refuse an action under the Model Law if it would be manifestly contrary to the public policy of the enacting State. Courts read this safety valve narrowly, so that it does not swallow the whole system of cooperation.

Supremacy of International Obligations: Article 3 of the Model Law

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In substance, the Model Law cannot override an obligation of the enacting State under a treaty or other agreement with other States; to the extent of any conflict, the treaty or agreement prevails. This matters because a country may already have, or later join, a bilateral or regional insolvency treaty. If India enacts the Model Law with this Article, it would govern how that law sits beside any agreements India makes under Section 234 of the Code.

Enabling Provisions in the Code: Sections 234 and 235

▶ Watch this part of the lecture (2:44:23)

The Code says very little about cross-border insolvency; it has only two enabling sections.

• Section 234: the Central Government may enter into an agreement with the government of any country outside India for enforcing the provisions of the Code. It may also notify conditions for applying the Code to assets or property of a corporate debtor or debtor, including a personal guarantor, situated in a country with which reciprocal arrangements have been made.
• Section 235 (letter of request): if a resolution professional, liquidator or bankruptcy trustee believes that assets of the debtor are situated in a reciprocating country, he may apply to the adjudicating authority. If satisfied, it may issue a letter of request to a competent court or authority of that country, asking for evidence or action relating to those assets.

The position in practice

These sections depend on agreements, and no such agreement is known to have been made. So India still has no operative statutory system to recognise foreign insolvency proceedings or to have Indian proceedings recognised abroad. Indian professionals must seek recognition under the laws of each foreign country, where those laws allow it.

The Code gives the resolution professional control over the company's assets located in a foreign country, but not over the assets of its foreign subsidiaries, which are separate companies.

The Jet Airways cross-border insolvency protocol (2019)

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Reform: Insolvency Law Committee, Draft Part Z and Section 240C

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Insolvency Law Committee (October 2018)

It recommended that India adopt the UNCITRAL Model Law with suitable changes, and prepared a draft Part Z for insertion in the Code. It suggested that:

• the law should at first apply only to corporate debtors, with NCLT benches as the forum;
• India should begin on the basis of reciprocity;
• a safeguard should be kept for matters manifestly contrary to public policy;
• the registered office would be presumed to be the centre of main interests, unless moved to another country within three months before the proceeding, to stop a debtor from shifting it just before insolvency.

Committee headed by Dr. K.P. Krishnan (June 2020)

It reported on the rules and regulations needed to make Part Z work, suggesting factors for finding the centre of main interests and guidelines for communication between courts.

Section 240C: the present position

The 2026 amendment inserted Section 240C. It would empower the Central Government to make rules for cross-border insolvency proceedings (recognition, relief, judicial cooperation and coordination) for notified classes of debtors and countries, allow those rules to adapt the Code and the Companies Act, and designate special NCLT benches. But it has not been brought into force, and no rules have been made under it.

Practical Problems in Cross-Border Insolvency

▶ Watch this part of the lecture (2:49:25)

1. Recognition: an Indian resolution professional can act abroad only where the foreign law allows it, and a foreign representative has no clear route into an Indian court.
2. Tracing assets hidden behind chains of foreign companies.
3. Forum shopping: a debtor may shift its centre of main interests to a country with a friendlier law.
4. Conflicting priorities: the Indian waterfall may not match the waterfall abroad.
5. Public policy exception, which a court may use to refuse cooperation.
6. Delay and cost, since every step needs local lawyers and local courts.

Multinational corporate groups

The hardest problem: a large group may have dozens of companies, each a separate legal person, incorporated in different countries. Which court has jurisdiction over which company, and should they be resolved together or separately?

• UNCITRAL Model Law on Enterprise Group Insolvency (2019) addresses group problems.
• UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments (2018).
• India has adopted neither.
• The new Chapter V-A of the Code, on group insolvency, would let the Government make rules for coordination among group companies in India, but it too is not yet in force.

Domestic and Cross-Border Insolvency Compared

Point	Domestic insolvency	Cross-border insolvency
Courts	One court controls all the assets.	Several courts control different assets.
Priorities	One law fixes the priorities.	Different laws may fix different priorities.
Moratorium	One moratorium binds all creditors.	An Indian moratorium does not automatically bind a foreign court.

Quick revision

▶ Watch this part of the lecture (2:52:05)

• Liquidation is the process; dissolution is its end point.
• Liquidator conducts, committee of creditors supervises, NCLT decides disputes.
• The resolution professional tries to save the patient; the liquidator settles the estate.
• Only Sections 234 and 235 are operative cross-border law; the Model Law is a model, draft Part Z a proposal, Section 240C enacted but not in force.
• Domestic insolvency: fairness among creditors. Cross-border insolvency: fairness among creditors and cooperation among countries.
• In every problem, first identify the creditor, the debt and the default, then choose the right door under Section 7, 9 or 10.
• Always name the section, support it with the leading case, and check whether the 2026 amendment, where in force, has changed the rule.
• Where two concepts look similar, such as financial and operational creditors, or resolution and liquidation, write their differences clearly, with an example.